With a Private Members’ Bill set to be debated for the second time in parliament this week, can we expect a more consultative approach from employers on introducing new workforce contracts?
Tomorrow (22 October), a Private Members’ Bill aimed at stopping the practice of “fire and rehire” will receive its second reading in parliament.
Barry Gardiner, Labour MP for Brent North, launched the Bill in June 2021 in response to a steady stream of employers announcing they would dismiss employees and then issue them with new contracts – typically on worse financial terms – and threatening them with permanent redundancy if they failed to agree.
The succession of fire and rehire stories appeared to begin with pandemic-hit employers facing difficult decisions, such as British Airways, where employees threatened strike action in January over plans to force them to accept new terms and conditions.
But more recently we’ve seen less beleaguered household names such as Weetabix, Clarks and Tesco join the list of companies accused of dismissing staff, only to re-engage them on less favourable contracts. The practice is banned in Ireland, France and Spain.
Unions and conciliation service Acas have been quick to condemn the practice, with retail union Usdaw winning a court case in Scotland preventing Tesco from moving staff at a distribution centre onto new contracts. They argue that employers are using it as a mechanism to slash labour costs by placing employees in a position where they have to – in the relatively short consultation period of 45 days – make a decision between new terms or losing their job altogether.
In May, a poll conducted by the Unite union found that 70% of the public condemned the practice, and the union was one of several that wrote to MPs asking for the practice to be outlawed.
But despite murmurs from the government (business minister Paul Scully branded it as “bully-boy tactics”, for example), there has so far been no hint of legislation being passed to make it unlawful.
According to Gardiner, “the culture of fire and rehire is killing worker confidence and returning us to an era of industrial relations belonging to the last century or well before”. He calls it a “blunt bat” when a modern approach to employment needs is required. His Bill has support from more than 100 MPs across all parties in the Commons.
The Employment and Trade Union Rights (Dismissal and Re-engagement) Bill, to give it its full name, would impose on employers a “duty to consult” where decisions are made to terminate the contracts or substantially change the terms of 15 or more staff, providing the organisation employs 50 or more people overall.
However, it won’t make the practice itself unlawful, only place more stringent requirements on employers regarding how they consult with employees and transparency around their reasons for imposing new contracts.
Consultation should begin “as soon as is reasonably practicable” and in good time for an agreement to be reached. Employers would have a duty to disclose any information regarding the proposed new terms and the reasons for them to employees and their appointed representatives.
As is currently the case with redundancies numbering more than 100, the Bill proposes that employers notify the Department for Business, Energy and Industrial Strategy if more than 50 employees at one establishment are to be affected by a dismissal and re-engage arrangement.
Within the law
But how does this compare to the current requirements? According to Tina Chandler, head of employment law at Wright Hassall, some employers see it as the only practical way around a thorny issue. Managed carefully, they can use it and remain within the law.
Employers tend to dismiss and re-engage where they are “conscious that there isn’t a legitimate risk of redundancy”, she explains.
This might include a situation where employers want to reduce the number of redundancies or save on the cost of making people redundant; where negotiations on terms and conditions fail; when they’re looking to standardise terms and conditions or where they want to introduce more flexibility into contracts.
“Employers should only initiate ‘fire and rehire’ as a last resort, and if the changes are deemed essential,” she adds. Other options could be looking into flexibility clauses in contracts as a way to make reasonable changes without unilateral amendments.
“With regards to the method itself, Acas urges that a fair dismissal process is observed to minimise possible legal threats. All employees should be granted sufficient notice (statutory or contractual, whichever is longer) and be offered the right to appeal.
“Although it may be legally viable, to some it’s morally questionable, so employers need to be convinced that taking such drastic action is worth it to safeguard the future of their business.”
Matter of choice
The CIPD agrees that fire and rehire should only ever be used as an “absolute last resort” where voluntary agreement to contract changes is not possible.
But without legislation to outlaw it, employers can continue to re-engage staff on less favourable terms as long as they remain broadly within Acas guidance and show they have consulted in some way.
If Gardiner’s Bill passes the second reading, it will go to committee stage to take in any proposed amendments. After a third and final debate, it must then pass to the House of Lords to be approved before receiving Royal Assent.
Until this is written into legislation, it will be down to individual employers to consider the moral and legal risks of changing terms and conditions without truly listening to the workforce. Even after, some may continue to find ways to get around the law.